'Some large corporates believe that they can create entrepreneurs and entrepreneur labs. This is good but the reality is that it's really the startup founder coming in, who has a different way of looking at a problem and solving it.'
Among the global enterprises supporting or engaging with the Indian startup ecosystem to help it scale to become the third-largest globally, Microsoft has been one of the earliest backers. The company has launched multiple programmes over the past many years to fast track development of startup ideas from the idea stage to the growth stage. Microsoft had recently launched its 100X100X100 programme for B2B startups to get 100 companies to spend $100k over an 18-month period on solutions offered by 100 early and growth stage software-as-a-service startups. Programmes like this, says Lathika Pai, Country Head, Microsoft for Startups (MFS) – MENA and SAARC regions, are important for startups to mature in their journey. “It’s no longer the big eating the small, but it’s the fast eating the slow.” Pai talks about the current state of the startup ecosystem, existing role of large enterprises, what it takes to develop successful global accelerator models like Y Combinator in India and more in an interaction with Financial Express Online. Edited excerpts below:
How are you engaging with startups during Covid even as work-from-home looks to become new normal?
Typically our engagements are with B2B startups because of the fact that B2B startups are the ones we can help scale by taking them to our enterprise clients through our co-sell programme. Enterprise clients are looking for innovative solutions, innovation, and their digital transformation and that is why we work with B2B. We also work with B2C in terms of helping them optimize their technology. At MFS we work typically with seed to Series A startups. In addition, what we realize is this is a great time to actually bring some of our best practices, our technology, webinars and sessions to the larger ecosystem. Every week we have a topic, it’s called ‘ScaleUp Thursdays’ and we bring an expert in. So we believe that this is a time for us to leverage the fact that people are working from home and how do we get experts to help and support startups that are in different parts of the country. The reality is for all of us globally, we don’t know what that light at the end of the tunnel is looking like, so it is better to rather get to the basics like how long can I survive by literally saying that I have zero business experience and it’s going to take me, say, three to nine months to get business rolling.
Also working with industry bodies like TiE, Nasscom and CII, we are proactively creating funding to help startups and look what kind of supports are the startups looking for in terms of deferred payments, access to working capital, interest in loans with lower interest rates.
Microsoft has been among the earliest startup backers in multiple ways such as corporate venture arm, corporate accelerator arm, in-house programmes etc. How do you look at this concept of venture building that serves both corporate and startups? Also, how does Microsoft builds on it?
It’s no longer about the big eating the small, but the fast eating the slow. Some large corporates believe that they can create entrepreneurs and entrepreneur labs. This is good but the reality is that it’s really the startup founder coming in, who has a different way of looking at a problem and solving it. So I think lots of corporates have realized that they need to absolutely invest in innovation. There are some who have been extremely successful, for example, if you look at the Target accelerator, they have a brilliant model which says if you are accepted, and it’s not just about space and mentoring and dollars but about how Target becomes your first client. To me, that’s huge for any startup. So when a corporate recognizes to have a business use case for digital transformation and creates a corporate venture arm that is focused in investing in startups to help in digital transformation is when the synergies come in very, very closely.
At Microsoft, the startups that we create are not necessarily focused on internal Microsoft strategy, but we are looking at our global enterprise clients and to see how we can plug our startups into those enterprises. Our 100X100X100 programme is really looking at how we find 100 corporates who are willing to engage with 100 startups that are mature in their journey.
But you would agree with the fact that large enterprises inability to have operational flexibility and nimbleness in operations is the reason why they seek to partner or acquire startups for their idea, talent etc?
You are right. Many corporates are becoming so big that they no longer have the agility that startups have in terms of innovation, idea, and execution. But I don’t think that startup can move the needle in terms of culture. Culture changes are a completely different story, from an acquisition perspective. I was a part of an event some months ago where there were about 100+ CXOs across the board and I asked them how many of you all want to engage with startups. Everybody put up their hand and when I asked how many of you are engaging with startups less than five put up their hand. So clearly there is that gap that we see. Unlike the west, Indian corporates get anxious stating that you are a startup, you don’t have a three-year track record, I don’t know if you’re going to be around etc. Now that’s definitely changing for sure.
Unlike foreign MNCs, do you think majority Indian corporates are yet to go all-out in engaging with startups? Also, any reason why startups seem reluctant to work with large businesses?
Yes, domestic companies have been much slower in adopting and engaging with the startups. I call it the Not Invented Here syndrome, which is within the corporate itself. So typically the large Indian corporates have very large IT arms. The CIO believes that a particular solution that the CMO is asking for can be developed by three to four programmers and they go down that particular path. It is a myth that needs to be destroyed that the solutions which are available are really proven, tested and if Western counterparts are willing to use it then we should also do. Also, many startups get anxious saying that they don’t want to talk to Indian corporates because once they look at the architecture, they kind of steal the IP and want to recreate it.
Despite being the third-largest ecosystem, India doesn’t have the likes of successful incubator/accelerator brands like Y Combinator or Tech Stars? Do you see it as a risk appetite issue?
From a Y Combinator perspective, you must understand that Silicon Valley has a huge appetite for risk, in terms of backing just startups on an idea. In India, the culture is still about the wait and watch. The amount of money that’s available as seed money is just a dot compared to what is there in the US. So what will India need is I think a larger amount of not just seed-funded companies but to fund at the seed level. Every Indian corporate CEO says I am going to engage with this many startups. Even if they engage with let’s say 1,000 startups, think about the total number of startups who get benefited. This is what we are trying to do as Microsoft has the top enterprise and SMB clients in India and globally. If more enterprises make this a part of the mandate, I think that is going to be much more powerful than just giving funding.
Any difference you see in the approach by the Indian government vis-à-vis Chinese and the US startup ecosystem?
The government has realized that they need to work very closely with industry bodies like NASSCOM, TIE and CII. The kind of money that Chinese startups have, as a result of what the Chinese government has done is absolutely phenomenal. In the US, it’s not that any government necessarily did anything for startups. It was every state that created its own policy. I’ve now worked personally very closely with six states including Gujarat, Rajasthan, Kerala, Maharashtra, Goa and Telangana. The amount that each of the state governments is going to invest in the startup ecosystem, over and above of what DPIIT and the Centre is doing is really strong. That is why we started the Highway to a 100 Unicorns saying that how we get those startups to be presented to investors who typically would not go into the states looking for the startups.